The latest US sanctions on oil tankers transporting Russian petroleum are set to significantly disrupt Russia’s export operations. Nearly 1.5 million barrels a day of crude shipped from Pacific and Arctic ports could be heavily curtailed, with more than one-third of those cargoes requiring specialized tankers that will be hard to replace. This development is particularly relevant to the maritime industry, as it highlights the critical role of specialized vessels in maintaining global oil supply chains.

Impact on Russian Oil Exports

The US Treasury Department’s Office of Foreign Assets Control (OFAC) has imposed restrictions on 158 oil tankers involved in Russian oil trade, with the State Department targeting an additional three vessels. These measures are part of the most aggressive round of sanctions on Russia’s oil trade by any Western power since the war in Ukraine began. The oil market is still assessing the impact of these sanctions, which could reshape expectations for a global supply surplus in 2025. Brent oil has already rallied $5 a barrel since the measures were introduced, with predictions of further gains.

Specialized Tankers and Arctic Crude

The crude streams most at risk are those that rely on specialized tankers. About 550,000 barrels a day from the Arctic and Sakhalin island are particularly vulnerable because they depend on purpose-built tankers, all of which have been sanctioned. For instance, the Sakhalin 1 and Sakhalin 2 projects in Russia’s Pacific, with combined crude flows of about 250,000 barrels a day, have seen all dedicated fleets of shuttle tankers designated. These vessels require a bow-loading mechanism to take on cargoes, and there are no unsanctioned ships capable of performing the same job.

East Siberian Crude (ESPO)

About 900,000 barrels a day of ESPO crude could also be significantly impacted. Almost all ESPO exports go to China from the Pacific port of Kozmino, and nearly three-quarters of the shipments made since the start of October were on tankers now sanctioned by the US. While there isn’t a dedicated fleet serving Kozmino, many tankers have made multiple trips between the terminal and Chinese ports in the past three and a half months. A total of 41 different ships have loaded crude at Kozmino since the start of December, and 32 of them, or 78%, have been sanctioned.

Urals Crude Flows

Urals is Russia’s key crude, with about 1.8 million barrels a day from three western ports. One-quarter of Urals cargoes shipped since the start of October were carried on tankers now blacklisted by Washington. An additional 30 tankers, or 13%, were loaded onto vessels sanctioned by the UK and the European Union, but not by Washington. The grade is shipped through the ports of Primorsk and Ust-Luga on the Baltic and Novorossiysk on the Black Sea. Three-quarters of Urals cargoes end up in India, with Turkey accounting for another 20%.

Potential Alternatives and Ship-to-Ship Transfers

One hope for Russia is that a relatively small portion of international tankers collecting cargoes from the two vessels were designated. If buyers and shippers are willing to take oil handled by sanctioned vessels, the barrels may continue to flow. This could lead to an increase in ship-to-ship transfers, a practice criticized by the International Maritime Organization. However, buyers of Russian oil would need to be confident that they can receive deliveries from ships that have collected cargoes from sanctioned vessels.

Conclusion

The latest US sanctions on oil tankers transporting Russian petroleum are set to cause severe disruption across the nation’s export machine. The maritime industry will play a crucial role in navigating these challenges, as specialized tankers and alternative shipping methods become increasingly important. The impact on global oil supply chains and the potential for further sanctions under the new administration highlight the need for adaptability and strategic planning within the maritime sector.